Sustainable economics with clean and energy
efficient vehicles

The Commission's revised proposal for a Directive
on the promotion of clean and energy efficient road transport vehicles
introduces sustainable economics into public procurement of vehicles and
transport services. Public authorities will use criteria for lifetime costs for
energy consumption, CO2 emissions and
pollutant emissions when they procure vehicles. A harmonised methodology will be
applied to quantify these costs.

Sustainable transport

Improving the health and welfare of the European population and achieving
long-term environmental sustainability are important objectives for the EU
authorities. The challenge is particularly acute for the road transport sector,
which depends essentially on oil as single energy source and emits significant
quantities of CO2 and pollutants harmful to the environment and human
health.

The continuing growth in the transport sector has increased concerns about
the economic costs of energy supply as well as the impact on the environment. In
the EU, the road transport sector is responsible for 26% of final energy
consumption and 24% of CO2 emissions. Energy use and emissions from
the road sector continue to grow around 2% per year. The EU, on the other hand,
is committed to an 8% reduction in greenhouse gas emissions by 2008-12 relative
to 1990. Pollutant emissions from road transport contribute to a large extent to
the poor air quality in many European cities where Community standards are not
met.

The main challenges related to sustainable transport are:

Security of energy supply and dependence on oil;

Climate change and CO2 emissions;

Health effects from air pollution and pollutant emissions from
vehicles.

Vehicle technologies that increase energy efficiency and
reduce the emission of CO2 and pollutants have been successfully
developed and demonstrated with the support of Community funds. Broad market
introduction, however, is often hampered by high initial costs and thus
insufficient customer demand. Action at European level is required to create
markets of sufficient size to bring down cost of vehicles with better
environmental performance.

Internalizing the actual lifetime costs of vehicles for operators and for
society as award criteria in the procurement process provides an economic
instrument to ensure awareness of 'sustainable economics'.

Lifetime costs for vehicle operation

The key parts of energy and environmental costs are the costs of fuel
consumption and emissions of carbon dioxide (CO2) and pollutants with
an impact on health, such as nitrous oxides (NOx), non-methane hydrocarbons
(NMHC) and particulate matter (PM).

Studies on the negative effects of traffic emissions have provided reference
values per unit of pollutant emitted. Such values vary in relation with
territorial context. Average values at EU level have been estimated in
particular by the BeTa[1],
ExternE[2],
UNITE[3] and
CAFÉ[4] studies, which
were widely reviewed by experts. Cost for CO2 emissions has been
determined e.g. in the UNITE and ExternE projects which both come very close in
their estimations.

Examples of total lifetime costs, together with typical vehicle prices, are
given in Table 1 for vehicles with present emission standards, a EURO IV bus,
and a EURO 4 diesel car. This monetisation shows the relative importance of
costs incurred over the lifetime of vehicles, compared with the vehicle price
invested into procurement. An informed decision, taking into account the total
cost of the vehicle's purchase price, the energy cost for the operator and
pollutant costs for society could then be based on the sum of vehicle price and
lifetime costs. This would minimise the overall cost for the operator and for
society.

The potential for energy saving and emissions reduction from clean and energy
efficient vehicles through promotion by public procurement has been estimated in
a study by PriceWaterhouseCoopers
(PWC)[5] for the Commission by
assuming all decisions would be based on the sum of vehicle price and lifetime
costs.

An energy saving of 22% of the vehicles covered could be achieved, resulting
in a total amount of 4.6 Terawatt-hours annually by 2017, by when the maximum
effect from this measure could be expected. This saving corresponds to about
half the annual energy production of a large nuclear power station.

CO2 emissions from the vehicles covered by public procurement
could be reduced by 29% by 2017, giving a total of 1.9 Mega-tonnes CO2
avoided annually. This represents of order 0.5 % of all transport
CO2 emissions.

Economic gains with lifetime cost based procurement

A cost-benefit analysis in the PWC study, weighing possible higher investment
cost for the vehicles up-front against the saving from lower energy consumption
and CO2 and pollutant emissions, shows potentially large economic gains for
operators as well as for society.

Potentially higher cost for the vehicles is largely compensated already by
the saving from lower fuel cost, which profits the operator directly. For the
period up to 2017, possibly higher expenditures of 11.5 billion Euro would be
overcompensated by a saving of 21.3 billion Euro from a lower energy bill.
Additional benefits of 2.5 billion Euro saving can be expected due to lower CO2
emissions, and 9.4 billion Euro saving due to lower pollutant emissions. The
total net benefit over the period up to 2017 could amount to 21.5 billion
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